Why did social democrats like Kok, Nyrup Rasmussen and Schröder retrench the welfare state? Since, social democrats are typically punished for welfare state retrenchment and because these policies do not equate well with social democratic egalitarian principles, it is difficult to see what they gain from it. I argue that, the intra-party balance of power between activists and leaders determines whether parties are office-seeking (leader dominated) or policy-seeking (activist dominated). This behavioral difference explains why some parties are responsive to environmental incentives such as the economy and public opinion (office-seeking parties) and others are responsive to policy-motivated activists (policy-seeking parties). By comparing seven social democratic parties (Denmark, France, Germany, the Netherlands, Spain, Sweden and UK) in the period 1980-2005, I analyze when and why these parties introduced welfare state retrenchment. This paper theorizes and empirically validates that office-seeking parties enact welfare state retrenchment if the risk of losing votes due to an underperforming economy becomes larger than the risk of losing votes due to the mobilization of unions and opposition parties. Policy-seeking social democrats retain a social democratic ideology, unless prolonged failure to win office empowers pragmatic leaders to push through office-seeking strategies.
